Investment Highlights

• 1QFY18 earnings increased by +30.7%yoy, in-line with our expectation

• Growth in 1QFY18 revenue supported by the provision of existing concession related services

• 1QFY18 net cash reserve remains depressed, potentially capping dividend payment

• Maintain NEUTRAL with a revised target price of RM2.10

Double digit growth in revenue. MY E.G. Services Berhad (Myeg) reported 1QFY18 earnings of RM52.8m. This translates into an increase of +30.7%yoy. The improvement in earnings was mainly attributable to growth in volume of the group’s existing concession related services and higher profit margin of 53.8%.

Revenue. The increase in 1QFY18 revenue of +24.7%yoy was mainly attributable to:

i) Higher transaction volumes from the online renewal of foreign workers’ permits (FWP), foreign workers rehiring programme services (FWR services) and foreign workers insurance from both FWP as well as FWR services and;

ii) Increase in revenue contribution from motor vehicle trading related services. However, the increase in the quarter’s revenue was partially offset by:

i) Higher personnel related expenses and operating expenses to support the growth in FWP and FWR services;

ii) Higher interest cost from the term loan to finance MYEG’s newly acquired offices and;

iii) Higher depreciation charges.

Within expectation. All in, MYEG’s 1QFY18 financial performance came in within our and consensus expectations, accounting for 20.4% and 20.5% of full year FY18 earnings estimates respectively.

Net cash position remains depressed. MYEG’s net cash position as at 1QFY18 amounted to RM47.6m. This represents a decline of -7.9%yoy as compared to 1QFY17 net cash position of RM51.7m.

Source: MIDF Research - 30 Nov 2017